The third quarter 2011 was one of the most active on record, as the catastrophe bond market responded to investor demand for additional investment opportunities, particularly for diversifying peril transactions. Three transactions totaling USD512 million were completed during the third quarter 2011, making it the third most active third quarter on record. Completed issuance contained no exposure to U.S. hurricane peril. Excluding quarters in which no cat bond issuance overall occurred, this is the first quarter since the third quarter 2002 in which there was no transfer of U.S. hurricane risk.

The third quarter of 2011 was one of the most active on record for the catastrophe bond market, according to a new update from GC Securities, a division of MMC Securities Corp., a U.S. registered broker-dealer and member FINRA/SIPC, a provider of investment banking services to the re/insurance industry and affiliate of Guy Carpenter & Company, LLC.

Chart: Historical Capital Levels of Guy Carpenter Global Reinsurance Composite:The chart below shows historical capital levels for the Guy Carpenter Global Reinsurance Composite beginning in 1998. From a pricing perspective, rates tend to rise when capital levels in the sector tighten. Conversely, reinsurance rates on line often fall when capital levels are above trend. The decline in capital growth witnessed so far this year goes some way towards explaining the building pricing pressures seen in property catastrophe lines.

Third Quarter 2011: Update on Property/Casualty M&A Activity:During the third quarter 2011, financial market volatility and a difficult operating environment continued to stifle, but not completely hinder, merger and acquisition (M&A) activity for property/casualty (P&C) risk-bearing entities. During the quarter, the most significant activity was in the form of deals announced, as opposed to transactions closing.

Update: Floods in Thailand: Thailand has experienced its worst flooding in years over the last few months, leaving more than 420 people dead and causing severe damage across northern and central regions of the country. The floods have severely damaged and disrupted manufacturing operations in Thailand. Flooding has forced at least seven huge industrial estates in central regions to close, prompting the Federation of Thai Industries to warn that damage to the industrial sector will be in the billions of dollars.

Uncover and Mitigate Product Liability Risk: Avert a Casualty Catastrophe:Danger routinely enters product supply chains. An error at a plant or even a flawed product design could lead to extensive economic damage. While the direct cost of these events comes to mind first, few grasp the full extent of product liability insurance exposure. The integrated business relationships required to bring a product to market mean that one event could trigger a “casualty catastrophe” that sweeps up component manufacturers and distributors - and their insurers.

The chart below shows historical capital levels for the Guy Carpenter Global Reinsurance Composite beginning in 1998. From a pricing perspective, rates tend to rise when capital levels in the sector tighten. Conversely, reinsurance rates on line often fall when capital levels are above trend. The decline in capital growth witnessed so far this year goes some way towards explaining the building pricing pressures seen in property catastrophe lines.

During the third quarter 2011, financial market volatility and a difficult operating environment continued to stifle, but not completely hinder, merger and acquisition (M&A) activity for property/casualty (P&C) risk-bearing entities. During the quarter, the most significant activity was in the form of deals announced, as opposed to transactions closing.

As 2011 winds down and we head into the January 2012 renewals, here we offer a retrospective of the top GC Capital Ideas stories of 2011 covering the year’s renewals.

1. Reinsurance Market and Rate Direction Still in Transition At April 1, 2011 Renewals:With substantial first quarter insured losses from catastrophes in Australia, Japan and New Zealand and the political unrest in the Middle East and North Africa, the direction of global reinsurance rates at April 1, 2011 renewals varies by region and line of business. Guy Carpenter & Company released its annual report on the state of the reinsurance market at the April 1 renewals period. As the quarter comes to a close, it is the most costly first quarter on record for the industry.

2. Wide Range of Outcomes Seen in June 1, 2011, Florida Reinsurance Renewals: The June 1, 2011, renewals took place against the backdrop of record first-half catastrophe losses and uncertainty surrounding the release of version 11 of Risk Management Solutions’ (RMS) U.S. hurricane model. The heavy international natural catastrophe-related losses that occurred during the first quarter of 2011 - combined with the multi-billion dollar losses from tornadoes in the United States in April and May - have added to significant loss activity over the past 16 months, culminating in insured losses of close to USD100 billion.

3. Chart: Guy Carpenter Global Property Catastrophe Rate on Line Index: Early predictions that January 1, 2011 reinsurance renewal rates were likely to fall have been proven correct. The Guy Carpenter Global Property Catastrophe Rate on Line (ROL) Index lost 7.5 percent - the second consecutive annual decline. Contributing to this move has been a combination of factors, including moderate loss activity and abundant levels of industry surplus.

6. 2011 Reinsurance Renewal Rates: Asia/Pacific:In Australia and New Zealand, reinsurance rates trended up slightly for loss-free programs, with those affected by losses sustaining higher increases. Few programs avoided losses, given a busy catastrophe year for the region.

Update: Floods in Thailand:Thailand has experienced its worst flooding in years over the last few months, leaving more than 420 people dead and causing severe damage across northern and central regions of the country. The floods have severely damaged and disrupted manufacturing operations in Thailand. Flooding has forced at least seven huge industrial estates in central regions to close, prompting the Federation of Thai Industries to warn that damage to the industrial sector will be in the billions of dollars.

Floods in Italy and France: Torrential rainfall across northern and central Italy and southeastern France has triggered widespread flooding, killing at least 11 people and causing damage to property and infrastructure. Reports said the heavy rainfall caused rivers to burst their banks and forced thousands of people to evacuate their homes. The Italian city of Genoa was badly hit on November 4 after more than 350 millimeters of rain fell in six hours. Authorities in Italy have issued fresh flood alerts and are warning thousands more people will be at risk if the flooding continues.

Guy Carpenter Asia Pacific Catastrophe Report 2011; Executive Summary: In our 2010 Asia Pacific Catastrophe report, we described how the Asia Pacific region has significant exposure to a wide variety of catastrophe perils. The events of the past 18 months have demonstrated how real these exposures are: a series of significant catastrophe losses in our region during 2010 and 2011 has turned the world’s focus on the Asia Pacific area.

Prevent Soil Swells from Eroding Capital: Shifting ground can move your portfolio. Subsidence, the damage caused to buildings due to ground movement resulting from the presence of expansive clay soils, can lead to costly claims that may not be expected. A subsidence problem can take years to materialize, which makes careful risk modeling incredibly valuable. Refining a sense of your portfolio’s subsidence exposure can help you manage your capital effectively, transfer risk if necessary, and improve your firm’s market performance.